Churchill Knight & Boox clients being investigated as Managed Service Companies

[dochkaian]

I also received my NI demand today.

No time / tax period stated, or any calculation, just a rather large amount to add to the earlier income tax demand.

this is becoming a bit of a nightmare . . .

[jamesbrown]

Got my PAYE determination today.

It worked out to be a whopping 17K of PAYE applied on top of my trading profits (70K) in 2017/18, so it's on the figure after CT was applied (turnover), so I can't levy/retrieve CT in a way.

The context is I only took 45K out of my trading profits that year (made up of dividends and basic salary, and paid the relevant tax on top) and the rest was carried over to the next financial year which stayed in the business account. So, in theory, would the worst-case scenario be the PAYE being on 45K as opposed to 70K (this figure would then be reduced to 6.5K)? As they're clearly disregarding my dividends as a way of payment.

On another note, the letter states this is 'due from you as an employer which would mean the monies would have to come from my business funds as opposed to personal. Is that right?

Either way, I will definitely be appealing this but still waiting for someone to represent me! I have reached out to WTT, David Kirk and QDOS who all appear inundated by inquiries from other contractors and accountants (apparently).

Fundamentally, the consequence of being caught under the MSC legislation is that the aggregate amount invoiced over your personal tax year is treated as a deemed payment. In other words, no CT, no dividends, full PAYE and both sets of NICs (EeNI and ErNI). You can use pretty much any online calculator for that (making sure to include the ErNI too). This will provide a rough idea, notwithstanding any interest and penalties and assuming that CT and dividend tax is eventually refunded. The numbers you can calculate yourself are likely to be much more accurate than any numbers from HMRC at this stage. There are unlikely to be any legitimate expenses (expenses that you could've claimed, had you been an employee).

https://www.gov.uk/hmrc-internal-man...manual/esm3535

[GregRickshaw]

You got your PAYE determination today? For 17/18? Did the letter go via Vladivostok?

Seriously though what is the date of issue that is the important date. If the date of Issue was after April 24th 2022 then it's null and void.

You have a limited time to appeal and if your letter has a valid issue date you may have missed the first appeal, seek help on this if your letter does have a valid issue date, but you never got it.

Let's hope your letter is not valid but if it is the £17k is the amount of PAYE HMRC believe you owe...... however if you do owe this (case is proven and you are an MSC) you will get your CT back so roughly £14k will no longer be valid, 20% of £70k (you may have 19% etc., but just gone for 20%) here so your PAYE debt is roughly £3k.

However your determination of PAYE is not the end of this as the Employers NIC contribution comes next which going on your figures is going to be between £10k and £12K. So your debt for the year is roughly very roughly £15k.

I think HMRC have also asked for Employees NIC so your class 2 contributions should be given back to you (no one is confirming this yet) as you will be billed for Class 1

As to the groups etc., all are decent options and they will respond at some point. If you are a CK client though the appeals letters and conditionals claims appeals letters are free and are pretty decent.

It is a business debt but unfortunately, unlike IR35, it does not end at the company. The debt transfer is particularly brutal. Company first if not able to pay from company, director (if not) then spouse/partner (even if not employed by company) and even down to kids. After that back to the accountants and if they can't pay the agencies etc., etc.,

[dochkaian]

I also have reached out to David Kirk and QDOS, but agree they are likely to be inundated with inquires. Any other Tax Accountant recommendations?

For the NI demand I have no idea how the earning stated by HMRC have been calculated, it appears over multiple tax years but no reference to which.

[pete1987]

You got your PAYE determination today? For 17/18? Did the letter go via Vladivostok?

Seriously though what is the date of issue that is the important date. If the date of Issue was after April 24th 2022 then it's null and void.

You have a limited time to appeal and if your letter has a valid issue date you may have missed the first appeal, seek help on this if your letter does have a valid issue date, but you never got it.

Let's hope your letter is not valid but if it is the £17k is the amount of PAYE HMRC believe you owe...... however if you do owe this (case is proven and you are an MSC) you will get your CT back so roughly £14k will no longer be valid, 20% of £70k (you may have 19% etc., but just gone for 20%) here so your PAYE debt is roughly £3k.

However your determination of PAYE is not the end of this as the Employers NIC contribution comes next which going on your figures is going to be between £10k and £12K. So your debt for the year is roughly very roughly £15k.

I think HMRC have also asked for Employees NIC so your class 2 contributions should be given back to you (no one is confirming this yet) as you will be billed for Class 1

As to the groups etc., all are decent options and they will respond at some point. If you are a CK client though the appeals letters and conditionals claims appeals letters are free and are pretty decent.

It is a business debt but unfortunately, unlike IR35, it does not end at the company. The debt transfer is particularly brutal. Company first if not able to pay from company, director (if not) then spouse/partner (even if not employed by company) and even down to kids. After that back to the accountants and if they can't pay the agencies etc., etc.,

Believe it or not, the letter is dated 29th March 2022 but I only received it today, as my current accountants forgot to send it across until this afternoon... 8 months late!!! I have clearly exceeded the 30 day appeal date, but I 100% have the intention to appeal regardless since my accountant has agreed this fault was on their account (they literally said " Apologies that this was not sent out to you, I have attached this for you now"). Before doing so, I will want an actual tax representative to set this up on my behalf, so hoping one of the groups will come back to me at some point this week.

Thanks for the heads up on the business debt... It does make me think (having only digested this saga since Friday) to be frugal over the coming months, and keep as many funds in the business account just in case it hits the fan sooner than I'd like... especially when my previous accountant Boox look to have gone down under. Just so brutally unfair.

[GregRickshaw]

That is very bad they never sent it on. Get some specialist help now to plead with HMRC and you may get the amount stood over. Not sure why their wolves aren't at your door as that amount is due now.

Re the business account if you have any money in there may be worth paying on account (HMRC account).

I really hope you can get this sorted that is so bad of your accountants, especially as they were the ones who have got you into this.

[CA100]

One thing to note on the transfer of debt -
If your business doesn't have sufficient assets to pay and you can't arrange a repayment plan with HMRC to pay from future business earnings, the debt will transfer.

It is at HMRC's discretion what proportion of debt transfers to the MSCP and what proportion to the company director. Of course I may be clutching at straws here and they just blanket transfer all debt to the company director. However the official guidance is they can allocate some or all to Boox or CK.

This is a big reason why Boox/CK have skin in the game.

For those in this position, it raises a question about the payment on account. If you POA from personal funds and lose the case, HMRC will take that money as payment and you lose the opportunity to have debt transferred to MSCP. However while you don't make that payment the debt obviously accrues interest.

[jamesbrown]

Regarding transfer of debt, there are effectively three categories and, while they are jointly and severally liable, they are ordered. The first category is the MSC and its directors and office holders. The second category is the same for the MSCP. The third category is associated people. In practice, the third category is a last resort and there must be no reasonable prospect of collecting from the first two categories before transfer to someone in the third. But the first two categories are still ordered and the first category will be exhausted first. So, yes, the MSCP and its relevant individuals are at risk, but they are in the second category and they will be approached after the first category.

[Guy Incognito]

The numbers you can calculate yourself are likely to be much more accurate than any numbers from HMRC at this stage.

https://www.gov.uk/hmrc-internal-man...manual/esm3535

Indeed - they have made their calculations assuming 100% of the company revenue was paid to the worker - which of course would make sense if we were really MSCs.

[Lotok]

For those who chose to use the accountants address for the business rather than their home address, any idea what's happening to mail that is being sent to Boox?

My form I sent to Companies house to change address was refused because my address is no longer in England, apparently it cannot be changed to Scotland